In 1984 Congress created a special class of property called “listed property” that, when used for business, requires special recordkeeping and has restricted depreciation rules. The list includes:
- Property used for entertainment, recreation or amusement (photographic, communication, audio and video recording equipment)
- Computers and related peripherals
- Cell phones and similar telecommunication equipment (added in 1989)
Computers and peripherals used 100% for business at a “regular business establishment,” which includes a home office, are not considered "listed property."
Only “listed property” used more than 50% for business will be eligible for Section 179 expensing and depreciation under the Modified Accelerated Cost Recovery System. Assets with 50% or less business use must be depreciated using “Straight Line” under the Alternative Depreciation System. The depreciable life of automobiles, computers and cell phones is five years under both MACRS and ADS.
You must keep detailed records to document the business use of listed property. For automobiles you would keep a mileage log.
For computers, cameras, audio/video equipment, etc., keep a log noting the date, length of time and purpose for each use of the item. For business use, show enough detail to prove the relationship to your work.
With a cell phone your log would indicate the date, number and person called, business purpose and length of call. If the bill listed each call separately you would indicate the cost for each call on the log. If you pay a flat monthly fee you would need to do a calculation.
New Jersey tax pro Robert D. Flach has been preparing 1040s for individuals since 1972.